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article imageGermany considers new property taxes for EU bailouts

By Katerina Nikolas     Apr 15, 2013 in World
Berlin - Germany is mulling new ways to raise finances to prop up the euro currency. Advisers to German Chancellor Angela Merkel are suggesting the weaker economies of southern Europe should levy property and asset taxes, to support future bailouts.
The Telegraph reported German economists are pushing property owners to pay new taxes. Professor Peter Bofinger said: "Over the next 10 years, the rich should give up a portion of their assets.”
The Cyprus bailout was the first one to involve a tax on savers. Digital Journal reported EU Commissioner Michel Barnier last week proposed a bill which will clarify rich savers will have to expect to contribute to future bailouts. Bofinger however pointed out "the resourceful rich just move their money to banks in northern Europe and avoid paying." Indeed, capital flight from rich depositors was rampant prior to Cypriot banks closing, leaving the accounts of business owners and frugal savers to be plundered.
German economists are now voicing the opinion that people in the southern European countries requiring bailouts are richer than those in Germany due to a higher proportion of home ownership which leaves homes ripe for taxation. Capital reported the ECB survey showed a higher paper wealth in some of the cash strapped Mediterrean countries than in Germany, noting "high private-sector wealth didn't prevent governments in southern Europe from racking up large debt burdens."
Emergency property taxes were introduced in Greece in 2011. However the taxes did not only target the rich, but every homeowner. To ensure the taxes were collected the government decreed the tax was added to electricity bills. As Ekathimerini reported the result is 1,000 customers have their electricity disconnected every day as they struggle to pay the property tax.
The Athens court declared the collection of the tax via electricity bills illegal last year but the government overrode their decision as the tax is raising an additional €3 billion each year which may otherwise go uncollected. In the recent round of troika negotiations the creditors insisted the emergency property tax remain in place.
The German idea of property taxes to raise funds towards bailouts is not new as Greece illustrates, just as Cyprus was used for the depositors tax. The ECB report noted "The role of home ownership is sizeable" but estimates of individual wealth from property fails to reflect declining property values.
More about Prof Peter Bofinger, Property taxes, Angela merkel, EU bailouts, Euro
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